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The good news is next week's $81 B in coupons should be a bit cheaper for Treasury

EB's picture




 

At the rate things were going in mid-January, the 30 yr yield was set to blast through the June 09 highs.  Amazing what a little equities downturn will get you, as a 9% correction in the S&P 500 has now rewarded T-Bond futures with a 2% rally and a 100bps decline in the cash yield (not too disimilar from Keynsian stimulus efficiency).  With these ratios, the 30 yr should retest its October low by the time the S&P is retesting its March low.  Don't worry though, the next massive corporate to sovereign risk transfer scheme, otherwise known as QE 2.0, is being vetted as we speak at 33 Liberty.

 

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Sat, 02/06/2010 - 00:21 | 220170 dumpster
dumpster's picture

 will give these guys one thing, they sure are good at making money. lol

 

just a printing press,, a will to decieve.. the popular something for nothing mantra thrown in. and dumbo economics  .. with krugman the shill..

Fri, 02/05/2010 - 22:14 | 220084 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I will give these guys one thing, they sure are good at making money.

Fri, 02/05/2010 - 19:25 | 219924 Anonymous
Anonymous's picture

Are you referring to the $1.6 trillion short term debt due in March ? I am of the same thinking too. I think ZH may have covered this topic too but not too sure.

Check the graphic on the NYT article link below -
http://www.nytimes.com/2009/11/23/business/23rates.html

http://www.nytimes.com/imagepages/2009/11/23/business/20091123_RATES2_gr...

Fri, 02/05/2010 - 18:50 | 219860 Anonymous
Anonymous's picture

That's the plan though. No way the US can rollover 40% of its debt this year (into longer term maturities) without an "engineered" fall in the market to get that risk aversion clamoring for the Newly minted paper. After most of the rollover risk is done, then the QE2 will be laid out.

Sat, 02/06/2010 - 02:07 | 220218 MrPalladium
MrPalladium's picture

+1 When you stop and think, it becomes clear that with 70% of the treasury debt maturing in a year or less, inflation will not benefit the government. In fact monetizing additional short term debt will only compound the roll risk, as foreigners can protect themselves from Fed money printing by refusing to roll except at much higher rates. It is deflation which will benefit the government, because it will allow them to extend the duration of the Treasury's debt.

Thus, in order to escape from the debt trap, Treasury must dramatically increase the 10 year and 30 year issuance. Thus, the government is likely to engineer a series of stock market corrections ahead of each longer term auction and perhaps allow the curve to steepen a bit to make the 30's more appealing. After all, what does offering a 5% yield matter if your intention is to produce 15% inflation?

The only question is how this stock decline will be "managed." Will it be an intermittent pumping on the brakes, producing a series of measured declines before each long bond auction? Or will it be a steady, grinding 1930 to 1932 style plunge to panic the 401(k) trillions into the long bond, with Fed using its power over the prop trading desks to make sure that the decline lasts long enough to get average duration north of 6 years?

Any wonder why QE-1 is about to halt for a while? Any wonder why Congress is talking about making all 401(k)s and IRAs offer a long bond option and is investigating ways of making the long bond "attractive" for retirement money?

The fleecing has just begun, but it doesn't take a genius to see that short the popular indexes three weeks before each long bond auction - and flat the day before the 30 goes off - is the odds on bet!

It doesn't take a conspiracy to get people to do what is in their interests!!

 

Fri, 02/05/2010 - 16:49 | 219641 Anonymous
Anonymous's picture

Will Chinese buy?

Fri, 02/05/2010 - 22:15 | 220085 Mr Lennon Hendrix
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They have no choice.  The only thing that can save them is if they go after gold here, there, and everywhere.

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